A recognized thought leader in Crowdsourcing and Open Innovation, Pia Erkinheimo is the head of the Finnish non-profit organization, TIVIT, the Strategic Centre for Science, Technology and Innovation in ICT, a Public Private Partnership of private and public companies, universities and research consortiums. She is the former Head of Crowdsourcing at Nokia, and is a frequent presenter at B2B conferences on Crowdsourcing and Open Innovation. She is also the 2013 moderator for the European Commission’s Open Innovation Strategy & Policy Group.

IBJ: How do you define Crowdscourcing?

Pia Erkinheimo: Crowdsourcing is essentially the combination, or more precisely, the application of social media to the process of open innovation. Crowdsourcing is about sharing, transparency and respect. It explores and exploits social media to enable brands, companies, cities and entrepreneurs to engage and seek input from online communities of people who, ideally, and because they are using social media rather than more conventional means, can contribute ideas to a particular discussion that are more creative and more powerful than would otherwise be obtained from more traditional methods. Companies from packaged-goods giants like Kraft Foods and Procter & Gamble to governments around the world use crowdsourcing to connect with and get input from stakeholders. Some colleagues of mine also highlight the fact that crowdsourcing fosters democracy. I certainly agree with this interpretation.

IBJ: It seems that getting the right crowd is critical. What makes a crowd the “right” crowd?

PE: Well, in the context of crowdsourcing, the “right” crowd is the “wise” crowd.

It has four attributes, and they were described by the writer, James Surowiecki, in his book, The Wisdom of the Crowd (2004). First, the crowd must reflect a diversity of opinions. Each participant has private information or a particular interpretation of the topic. Independence is the second attribute of a wise crowd. The competent crowd is a combination of passionate amateurs, – who are often more productive knowledge workers than ‘bored professionals’ – and experts, and people coming from other fields of life, looking at things from different perspectives. Essentially, contributors’ opinions are not determined by the opinions of others. The third attribute is decentralization, where contributors, who are geographically dispersed, can offer specific input by drawing on local knowledge. Lastly, there is the ability to aggregate, a mechanism to gather private judgments into a collective decision.

I have used artificial intelligence to help analyze the wisdom of the crowds, e.g. combining text-mining with clustering and regression analysis to offer a scientific big picture of the contributions. That has helped the decision makers, i.e. the business sponsors (in corporate setting), authorities and politicians (in societal questions), to analyze and decide alone, or together with the crowd, which contributions, or often combinations or mash-ups of contributions, should be taken further.

IBJ: If crowdsourcing was a company or product, what would be its value proposition?

PE: As we live in the world of ecosystems, and there is a business ecosystem battle going on in almost every industry, let me answer with a counter thought: I’d like to ask a question on how an organization, whose mission is to create wealth for its owners, can afford not to listen to their audience, customers, ex-customers and customers-to-be? How can any organization be so arrogant that it represents a view that “we know it all”, and says that we do not need to co-create, ideate and learn together with our ecosystem partners, customers, users or with the public authorities – as part of corporate social responsibility? I am seeing companies failing for not listening to what happens outside and not foreseeing the future openly with their crowd and non-audiences.

The answer also depends on where you wish to be in the crowdsourcing arena – are you willing to provide a matchmaking service where contributors and those wanting contributions meet? Do you wish to use crowdsourcing as part of your service offering (e.g. as part of consultancy/creative/design services)? Are you a crowdsourcing technology-platform provider? And so on. You can strengthen the dialogue with your audience if you are an existing brand, and you can create a brand from scratch with it.

Crowdsourcing is evolving all over the world as we speak, on every continent. It is a schoolbook example of a phenomenon that is both very local but also very global, where you can use existing social media business models and behaviour patterns to create value for both non-profit and for-profit organizations. I am looking forward to seeing what crowdsourcing and the open data movement can do together, now that the data processing capacity is getting much more affordable thanks to big data/cloud services.

IBJ: I understand that you have developed a model that enables start-ups to benefit from the wisdom of the crowd.

PE: Yes, the model consists of 10 different tasks that are key to launching any start up. The 10 processes include everything from market research and marketing to ideation, business development and fundraising (crowdfunding: donation, pre-purchase, equity or loan). For example, in “concepting,” when a start-up is developing its value proposition (let it be a digital service or a consumer / b2b product), the start- up could ask the crowd for ideas and user preferences. When it comes to branding and social media marketing, there are already several services where tens or hundreds of thousands of amateur and professional designers are ready to offer their services to develop the visuals for a product or service, for example. This could be as effective, and much less expensive, than a big ad agency. And sometimes you will find your flock of business angels from the crowds, thanks to evolving services for micro-funding, e.g. the Canadian Kickstarter service which will soon launch, and for equity funding, e.g. www.fundedbyme.com.

IBJ: How can large multinationals source ideas from the crowd?

PE: Even though a company may have thousands of employees, it can’t get all the right ideas from within the company all the time. So accessing and sourcing the crowd is a great advantage. In fact, a company that does not use crowdsourcing will find that they have a challenge scaling the intellectual and physical capacity of the organization in order to meet demand and stay ahead of the competition. Multinationals can and should source ideas on anything from strategy to human resources. Questions about which strategy to follow as well as on how to execute the strategy can be shared within the organization. Crowdsourcing can improve workplace policies, CSR programs and problem solving. Unlike other engagement mechanisms whose novelty wears off after a while, crowdsourcing offers a transparent and convenient way for employees to participate in decision-making. In large companies, like a Procter & Gamble, for example, there’s a growing trend to use crowdsourcing to design everything from logos and packaging to videos and banners for viral distribution. So, a design firm that subscribes to the crowdsourcing service will be able to submit designs. Even finance can benefit, as the crowd can contribute ideas on savings or efficiencies that improve the bottom line.

Crowdsourcing is completely transparent, something that is very important for large companies with well-known brands. It provides unprecedented access to information and decision-making, as well as a platform for customers, employees, prospects, partners and the public at large to participate in processes. Now, if you haven’t guessed it already, I’m a real believer in crowdsourcing.

I’m always saying, “Give me any problem and I will solve it with the crowd.”

IBJ: What are some of the challenges of crowdsourcing?

PE: Culture is an important one. Specifically, your organization needs to be open to receiving input from the outside. There is no point in going down the crowdsourcing path if your team is closed-minded or will feel threatened. Resources are another challenge, namely ensuring that your company has the intellectual resources to investigate the ideas.

Also, some organizations have yet to understand how social media has changed the dynamics of relationships between markets and brands. These organizations still believe that they can control everything. This is not the case, as evidenced by the numerous fan sites that have tremendous following, and where rumours and other conversations occur without input from the brands.

Companies should consider the following risks. It should be said, however, that these can be managed quite effectively through a clear strategy and effective communication from the outset of any initiative:

Confusion by the crowd caused by a lack of clarity about the task it has been given;

Low participation due to a lack of awareness of the audience/resource that a company wishes to reach and its behaviour patterns;

Gamification by special interest groups or individuals;

Controversy over IP ownership after an idea is submitted;

The crowd stops participating due to the perception that the organization is not responding to their input;

A reduced internal capacity for innovation caused by a misdirected sense on the part of management that the “crowd can do it all.”

IBJ: On the question of intellectual property, how can a company protect its IP if it must be open about it and share it with companies who could be competitors?

PE: Nobody can legally own an idea, so if you put an idea out to the crowd and they start asking you questions about it, you’ve got to open up. However, companies need to know that a great sense of fairness permeates all crowdsourcing. But if what you share with the crowd is an object that can be copyrighted, say a business model, then you should have it copyrighted before you go to the crowd.

IBJ: How might crowdsourcing change how organizations operate and how people live?

IBJ: Describe 3-5 best practices that a company should follow when it uses crowdsourcing?

PE: 1. Ensure support

In order to use crowdsourcing both internally and externally, there has to be a clear understanding that all ideas and contributions – whatever their source – will be appreciated. In a corporate setting, it does not make sense to use crowdsourcing if there is no executive power for developing the contributions further. This will only create bad-will and by that harm your company.

2. Be clear with definitions

Be sure that everyone understands what is meant when you talk about new ideas, innovations and open innovation. There has to be an understanding inside the company on how social media is being used internally

3. Do demos, pilot

Try out different crowdsourcing solutions, approaches and tools and find out what works best for your audience. Please do not get me wrong, you may have the technical bells and whistles already embedded in your current IT services. But you have to find and pilot the right memes for your audience.

4. Think of what you want to ask

Think carefully about what to ask from your audience. In order to steer your crowdpower right, you need to define and explain the challenge in a language that resonates with your audience. The most important thing is to get concrete contributions, so that the audience can build on each other’s ideas.

5. Give kudos

Tell your audience what they have accomplished. Give kudos; reward the best contributors and contributions. Crowdsourcing cannot be a “black hole” where the contributions vanish. That’s the easiest way to let down your audience.